Celtic Diva's Blue Oasis: My State Representative, Berta Gardner's "Berta's Briefing" on AGIA and the Special Session

Wednesday, June 04, 2008

My State Representative, Berta Gardner's "Berta's Briefing" on AGIA and the Special Session

I am fortunate to live in a district where I have two of the best Progessives in State House and State Senate - Berta Gardner and Johnny Ellis.

Both of them put out excellent, educational email briefings. I don't write much on the gas line issue because I actually have rather "fluid" opinions on the subject (I haven't totally made up my mind yet) but I thought this was a really good summary of the Administration's opinion and the questions before them.

Why don’t we insist on the “All Alaska Line” to Valdez?

Understandably many Alaskans favor a line from the North Slope to Valdez because they believe it will happen faster, would bring gas close to our population centers for local use and would employ more Alaskans. The Administration’s response is:

1. This option may be profitable, but it is not the most profitable option for the state (or the producers).

2. It no longer has the timing advantage it once had because Trans-Canada has done permitting and other work that may allow their line to be completed as quickly as any Valdez line.

3. AGIA requirements and the Trans-Canada proposal protect Alaskan access to gas for in-state use.

4. An all Alaska route to Valdez would not be the best way to promote jobs for Alaskans because the size limitations do not open up the North Slope basin to new exploration.

5. The best market for Alaska LNG from Valdez would be the Far East , which brings the potentially serious challenge of requiring federal export licenses.

Why should we offer $500 million for a pipeline when the producers say they will build a line without our money?

1. Commissioner Irwin turned this question around by asking “Why would BP/Conoco-Phillips turn down $500 million?” It is because the state money effectively buys real commitment and a proposal that opens up the North Slope basin to new companies that will be assured of access to a pipeline at reasonable shipping costs. This is the real benefit to the state and, in my opinion, the heart of AGIA. We want to not only take our gas to market, but also to invite new investment in a meaningful way. This threatens the control the big oil companies currently have over our resources. The new investors coming to our state will be the path for Alaskan employment and long term jobs.

2. The state cash investment will result in a lower tariff on shipments that over time will effectively not only pay back our $500 million but provide an additional $200 million. The money is not a gift but our own “skin in the game” which will generate broad returns.

What if the oil companies refuse to put gas in the pipeline?

1. Testimony by internationally recognized experts is absolutely clear that the lease holders have a duty to develop and market our resources when they can profitably do so. During the previous administration, the industry insisted that a pipeline for our gas was a hugely risky proposal and required major (and costly) concessions from the state. According to the Palin Administration, AGIA and the Trans-Canada proposal have removed this argument. When a pipeline is constructed, the producers will have a hard time saying it is “too risky” to commit the gas.

2. The US Congress has already determined that an Alaska gas pipeline is in the national interest. This means that the Federal Energy Regulatory Commission (FERC) can approve a plan without shipper commitment.

Ultimately, the approval of the Trans-Canada proposal gives Alaska both a carrot and a stick to compel the producers to ship the gas. The carrots are that AGIA and Trans-Canada offer 10 year tax certainty on shipping commitments made at the first open season, the opportunity for the producers to become partners in the line, and the state offers other royalty concessions. The stick is that their failure to participate risks federal charges of anti-trust, market manipulation and price-fixing. The bottom line here is that while the President urges OPEC nations to produce more oil and gas for the world market, and while the nation wants (and needs) Alaska ’s gas, a “robustly profitable” option to bring our gas to market is right before us.

I'm Berta, and I'm listening.


Anonymous Polarbear said...

I am listening, also, and thank you for the post. A few more points...

Trans Canada already possesses the rights of way through Canadian Native land on the pipeline route. I understand they are the only company to possess these rights beforehand, thereby eliminating years of delay.

The five natural gas spurs mentioned in the TCA proposal are under-appreciated. A southcentral spur would not only reach Anchorage, but would also provide gas to under-served rural communities along the route. Other small-diameter spurs could be constructed to other under-served rural areas of Alaska, long in need of basic infrastructure.

Last, a concern. I am told that all the pipe for the TCA line would be ordered overseas - that US steel mills cannot produce the pipe. I have not double-checked this claim. Still, the gas pipeline will be the largest single steel order in history. I would think a certain Presidential candidate from Chicago might want to use this as an excuse to upgrade US steel production capability. This steel order could rejuvenate many communities in the rust belt.

6/06/2008 2:42 PM  
Blogger CelticDiva said...

Thanks, Polar!

I don't think I've ever gotten so much information in so few words!

Perhaps this is an issue that Superdelegate Patti Higgins could discuss with the Obama campaign before she announces her movement to the Obama camp.

6/06/2008 10:26 PM  
Anonymous Polarbear said...

Good idea. There are substantial steel mills in Illinois, Indiana, Ohio, Pennsylvania, and West Virginia. The TCA steel order, if placed in the USA, would be large enough to rejuvenate the entire industry. I hope Patti Higgins is able to have that conversation.

6/07/2008 11:23 AM  

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